Novartis Plans to Streamline Worldwide Production to Boost Operating Profit Margin

Novartis AG (NVS) is planning to streamline its worldwide production to give its operating profit margin a boost amid falling drug prices in the United States, Chairman Joerg Reinhardt told Swiss weekly NZZ am Sonntag, Reuters reported Sunday.

In an interview, Reinhardt revealed that the proceeds from drug sales in the United States fell between 1% and 2% last year, due to the discounts that pharmaceutical companies have to grant large buyers to sell the drugs. Meanwhile, in Europe, drugmakers may still charge slightly higher or stable prices, the Novartis CEO added.

Novartis is aiming to increase its efficiency to be able to improve the operating profit margin of its pharmaceutical business to 35% from the current 32% within five years.

“Overcapacities have accumulated in the area of production over the past years,” Reinhardt said. “We are working on a global optimization.”